The European Central Bank has revealed plans for a massive trillion-euro bond purchase program to ward off deflation and end stagnation in the eurozone economy.

After holding key interest rates at their current all-time lows once again, the ECB launched a scheme to buy 60 billion euros ($85 billion) worth of private and public sector bonds per month between March and September 2016.

"All eyes were on [ECB president] Mario Draghi and he has delivered a bigger bazooka than investors were expecting," Allianz Global Investors' Mauro Vittorangeli said, adding that the news marked a "historic crossroads for European markets".

Mr Draghi said the aim was to drive eurozone inflation - which turned negative in December - back up to the ECB's target of around 2.0 per cent.

The program, which is known as quantitative easing or QE, will continue "until we see a sustained adjustment in the path of inflation," Mr Draghi told a news conference.

While QE had been used by other central banks around the world, the ECB had until now steered away from it, amid concerns it would take the guardian of the euro outside its remit.

Critics, including the German central bank or Bundesbank, complained QE was a licence to print money to get governments out of debt.

But Mr Draghi said the ECB's 25-member governing council at its first meeting of the year was "unanimous" on the principle that such a plan was a valid monetary policy tool.

And a "large majority" was in favour of taking such measures "now", he added.

Eurozone unity questioned

Opponents to QE had also expressed concern European taxpayers would have to foot the bill should any one country default on its debt.

But the plan had been designed so only 20 per cent of those risks would be shared, with the other 80 per cent to be shouldered by the national central banks of the countries concerned, Mr Draghi said.

Critics said it casts doubt over the unity of the eurozone and its principle of solidarity, and countries with already high debts could find themselves in yet deeper water.

The Germans have taught us to respect the independence of the European Central Bank. They must remember that themselves.

French finance minister Michel Sapin

"It is counterproductive to shift the risks of monetary policy to the national central banks," former ECB policymaker Athanasios Orphanides said.

"It does not promote a single monetary policy. This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro."

Economists were divided as to whether quantitative easing could really work in a single currency bloc made up of 19 economies in very different states of health.

Tensions broke out as the ECB's meeting got underway with French finance minister Michel Sapin firing a broadside at Berlin.

"The Germans have taught us to respect the independence of the European Central Bank," he told French radio.

"They must remember that themselves."

A German lawyer who has been prominent in attempts to halt eurozone bailouts said he was already preparing a legal complaint against the bond-buying program.

One eurozone central banking source said five policymakers opposed the expanded asset-purchase plan: the central bank chiefs of Germany, the Netherlands, Austria and Estonia, along with executive board member Sabine Lautenschlaeger, a German.

'Not out of woods'

Europe's paymaster Germany, in particular, was concerned the measure would take the pressure off governments to reform their economies and get their finances in shape.

At the World Economic Forum in Davos, German chancellor Angela Merkel said before the ECB announcement "no matter what sort of decision the ECB will take, we should not become diverted from the fact that we as politicians need to put a framework for recovery in place.

"Europe continues to be confronted by great challenges," she said.

"We have often talked about the debt crisis ... we have this somewhat under control but we are not out of the woods yet."

"The planned expansion of the ECB's balance sheet will help lower borrowing cost across the euro area, raise inflation expectations and reduce the risk of a protracted period of low inflation," the IMF managing director said in a statement.

"These measures will also strongly increase the prospects of the ECB achieving its price stability mandate."

Financial markets also cheered the ECB's plans.

European stocks rallied on the announcement and US shares were higher in early trading, while the euro sank against the dollar.

Sixty billion euros per month was equivalent to 0.6 per cent of eurozone GDP "and thus smaller than the Japanese QE, but larger than any of the US Federal Reserve's easing programs since 2008," Mr Schulz said.

ECB quantitative easing would affect the economy in many ways, from the liquidity channel, bank lending, interest rates, asset prices and portfolio rebalancing to the exchange rate, Mr Schulz said.

"But the most important channel is the impact on confidence and expectations," he said.

"An impressive announcement like the one today can boost investors' and households' inflation expectations."

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